SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                  For the quarterly period ended July 31, 2005

                         Commission file number 0-11254


                                 COPYTELE, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                Delaware                                    11-2622630
     -------------------------------                 ------------------------
     (State or other jurisdiction of                     (I.R.S. Employer
      incorporation or organization)                    Identification No.)


          900 Walt Whitman Road
               Melville, NY                                   11747
--------------------------------------------------------------------------------
  (Address of principal executive offices)                  (Zip Code)


                                 (631) 549-5900
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                               Yes __X__      No _____

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).

                               Yes __X__      No _____

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

                               Yes _____      No __X__

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

On September 2, 2005, the registrant had outstanding 90,715,448 shares of Common
Stock, par value $.01 per share,  which is the registrant's only class of common
stock.


<PAGE>


                                TABLE OF CONTENTS
                                -----------------


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

         Condensed Balance Sheets as of July 31, 2005 (Unaudited)
          and October 31, 2004                                            3

         Condensed Statements of Operations (Unaudited) for the
          nine months ended July 31, 2005 and 2004                        4

         Condensed Statements of Operations (Unaudited) for the
          three months ended July 31, 2005 and 2004                       5

         Condensed Statements of Cash Flows (Unaudited) for the
          nine months ended July 31, 2005 and 2004                        6

         Notes to Condensed Financial Statements (Unaudited)              7 - 13

Item 2.  Management's Discussion and Analysis of Financial Condition
          and Results of Operations.                                     14 - 29

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.     29

Item 4.  Controls and Procedures.                                        29


PART II. OTHER INFORMATION

Item 6.  Exhibits.                                                       30

         SIGNATURES                                                      30




                                       2
<PAGE>


                          PART I. FINANCIAL INFORMATION
                          -----------------------------

Item 1.  Financial Statements.
         ---------------------

<TABLE>
<CAPTION>
                                 COPYTELE, INC.
                                 --------------
                            CONDENSED BALANCE SHEETS
                            ------------------------


                                                                    (Unaudited)
                                                                   -------------
                                                                      July 31,       October 31,
                                 ASSETS                                 2005            2004*
                                 ------                            -------------    -------------
<S>                                                                 <C>              <C>
CURRENT ASSETS:
  Cash and cash equivalents                                         $   581,792      $ 1,002,777
  Short-term investments                                                398,353                -
  Accounts receivable, net                                               95,314           63,460
  Other receivables, net of allowance for doubtful accounts of
   $100,171 and $108,793, respectively                                   77,627           84,308
  Inventories                                                           555,020          999,429
  Prepaid expenses and other current assets                              12,323          122,482
                                                                   -------------    -------------
           Total current assets                                       1,720,429        2,272,456

PROPERTY AND EQUIPMENT, net                                              30,438           38,085

OTHER ASSETS                                                              4,888            5,509
                                                                   -------------    -------------
                                                                    $ 1,755,755      $ 2,316,050
                                                                   =============    =============

               LIABILITIES AND SHAREHOLDERS' EQUITY
               ------------------------------------

CURRENT LIABILITIES:
  Accounts payable                                                  $   231,496      $   402,640
  Accrued liabilities                                                    38,602           40,480
                                                                   -------------    -------------
           Total current liabilities                                    270,098          443,120

SHAREHOLDERS' EQUITY:
  Preferred stock, par value $100 per share; 500,000 shares
   authorized; no shares issued or outstanding                                -                -
  Common stock, par value $.01 per share; 240,000,000 shares
   authorized; 90,478,768 and 85,523,253 shares issued and
   outstanding, respectively                                            904,788          855,233
  Additional paid-in capital                                         72,342,772       69,474,058
  Accumulated deficit                                               (71,761,903)     (68,456,361)
                                                                   -------------    -------------
                                                                      1,485,657        1,872,930
                                                                   -------------    -------------
                                                                    $ 1,755,755      $ 2,316,050
                                                                   =============    =============

</TABLE>


* Derived from audited  balance sheet included in our Annual Report on Form 10-K
for the fiscal year ended October 31, 2004.

The accompanying notes are an integral part of these condensed balance sheets.


                                       3
<PAGE>


<TABLE>
<CAPTION>
                                 COPYTELE, INC.
                                 --------------
                 CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
                 ----------------------------------------------


                                                                     For the Nine Months Ended
                                                                              July 31,
                                                                   ------------------------------
                                                                        2005             2004
                                                                   -------------    -------------

<S>                                                                 <C>              <C>
REVENUE                                                             $   391,425      $   357,251

COST OF REVENUE                                                         555,259          129,518
                                                                   -------------    -------------

    Gross profit (loss)                                                (163,834)         227,733
                                                                   -------------    -------------

OPERATING EXPENSES
    Research and development expenses                                 1,725,197        1,732,345
    Selling, general and administrative expenses                      1,426,936        1,036,901
                                                                   -------------    -------------
          Total operating expenses                                    3,152,133        2,769,246
                                                                   -------------    -------------

LOSS FROM OPERATIONS                                                 (3,315,967)      (2,541,513)

INTEREST INCOME                                                          10,425            3,047
                                                                   -------------    -------------

NET LOSS                                                            $(3,305,542)     $(2,538,466)
                                                                   =============    =============



PER SHARE INFORMATION:
Net loss per share:
    Basic and Diluted                                               $     (0.04)     $     (0.03)
                                                                   =============    =============

Shares used in computing net loss per share:
    Basic and Diluted                                                87,619,508       82,277,894
                                                                   =============    =============
</TABLE>


The accompanying notes are an integral part of these condensed statements.


                                       4
<PAGE>


<TABLE>
<CAPTION>
                                 COPYTELE, INC.
                                 --------------
                 CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
                 ----------------------------------------------


                                                                     For the Three Months Ended
                                                                              July 31,
                                                                   ------------------------------
                                                                        2005             2004
                                                                   -------------    -------------

<S>                                                                 <C>              <C>
REVENUE                                                             $   132,125      $   216,447

COST OF REVENUE                                                         354,828           83,220
                                                                   -------------    -------------

    Gross profit (loss)                                                (222,703)         133,227
                                                                   -------------    -------------

OPERATING EXPENSES
    Research and development expenses                                   485,309          741,166
    Selling, general and administrative expenses                        415,194          427,352
                                                                   -------------    -------------
          Total operating expenses                                      900,503        1,168,518
                                                                   -------------    -------------

LOSS FROM OPERATIONS                                                 (1,123,206)      (1,035,291)

INTEREST INCOME                                                           4,153            1,079
                                                                   -------------    -------------

NET LOSS                                                            $(1,119,053)     $(1,034,212)
                                                                   =============    =============



PER SHARE INFORMATION:
Net loss per share:
    Basic and Diluted                                               $     (0.01)     $     (0.01)
                                                                   =============    =============

Shares used in computing net loss per share:
    Basic and Diluted                                                89,344,254       84,048,249
                                                                   =============    =============
</TABLE>


The accompanying notes are an integral part of these condensed statements.


                                       5
<PAGE>


<TABLE>
<CAPTION>
                                 COPYTELE, INC.
                                 --------------
                 CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                 ----------------------------------------------


                                                                     For the Nine Months Ended
                                                                              July 31,
                                                                   ------------------------------
                                                                        2005             2004
                                                                   -------------    -------------
<S>                                                                 <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Payments to suppliers, employees and  consultants                 $(1,675,809)     $(1,257,899)
  Cash received from customers                                          369,874          443,612
  Interest received                                                      10,425            3,047
                                                                   -------------    -------------
      Net cash used in operating activities                          (1,295,510)        (811,240)
                                                                   -------------    -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of short-term investments (certificates of deposit)        (398,353)               -
  Purchases of property and equipment                                    (3,322)          (8,273)
                                                                   -------------    -------------
      Net cash used in investing activities                            (401,675)          (8,273)
                                                                   -------------    -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from exercise of stock options                             1,276,200          836,265
                                                                   -------------    -------------
      Net cash provided by financing activities                       1,276,200          836,265
                                                                   -------------    -------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                   (420,985)          16,752

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                      1,002,777        1,023,531
                                                                   -------------    -------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                          $   581,792      $ 1,040,283
                                                                   =============    =============

RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING
 ACTIVITIES:
  Net loss                                                          $(3,305,542)     $(2,538,466)
  Stock option compensation to consultants                               44,609          132,252
  Stock awards granted to employees and consultants pursuant to
   stock incentive plans                                              1,482,088        1,502,150
  Restricted stock issued for services rendered                         115,372                -
  Provision for (Recovery of) doubtful accounts                          (3,622)         (73,159)
  Provision for excess inventory                                        437,990                -
  Depreciation and amortization                                          10,969           13,758
  Change in operating assets and liabilities:
    Accounts receivable and other receivables                           (21,551)          92,190
    Inventories                                                           6,419           12,121
    Prepaid expenses and other current assets                           110,159           29,521
    Other assets                                                            621              500
    Accounts payable and accrued liabilities                           (173,022)          17,893
                                                                   -------------    -------------
          Net cash used in operating activities                     $(1,295,510)     $  (811,240)
                                                                   =============    =============
</TABLE>


The accompanying notes are an integral part of these condensed statements.


                                       6
<PAGE>


                                 COPYTELE, INC.
                                 --------------

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                     ---------------------------------------

                                   (UNAUDITED)
                                   -----------


1.   NATURE AND DEVELOPMENT OF BUSINESS AND FUNDING
     ----------------------------------------------

Organization and Basis of Presentation
--------------------------------------

     CopyTele,  Inc.  was  incorporated  on  November  5,  1982.  Our  principal
operations are the  development,  production  and marketing of  multi-functional
hardware  and  software  based  encryption  products  that  provide  information
security  for   domestic   and   international   users  over   virtually   every
communications media and the development, production and marketing of thin, high
brightness, flat panel video displays.

     The condensed  financial  statements  have been prepared in accordance with
accounting  principles  generally  accepted in the United States of America ("US
GAAP") for interim financial reporting.  Accordingly, they do not include all of
the  information  and  footnotes  required  by US GAAP  for  complete  financial
statements.   The  information  contained  herein  is  for  the  nine-month  and
three-month periods ended July 31, 2005 and 2004. In management's  opinion,  all
adjustments   (consisting  only  of  normal  recurring  adjustments   considered
necessary for a fair presentation of the results of operations for such periods)
have been included herein.

     The results of operations for interim periods may not  necessarily  reflect
the  results of  operations  for a full year.  Reference  is made to the audited
financial  statements  and notes  thereto  included in our Annual Report on Form
10-K for the fiscal year ended October 31, 2004, for more extensive  disclosures
than contained in these condensed financial statements.

Products
--------

     We  currently  have 18  different  products  in our line of  hardware-based
encryption  solutions.  Our encryption products are  multi-functional,  hardware
based digital  encryption  systems that provide  high-grade  voice, fax and data
encryption using either the Citadel(TM) CCX encryption cryptographic chip (which
is  manufactured  by the Harris  Corporation) or the Triple DES or AES algorithm
(algorithms  available  in the  public  domain  which  are  used  by  many  U.S.
government agencies). In addition, we have developed two software-based security
products,  one of which  uses  either the  Triple  DES or the AES  algorithm  to
encrypt data files and e-mail  attachments in both desktop and laptop  computers
utilizing  Microsoft  Windows  operating  systems,  and the  other of which  can
encrypt voice and data in cellular and satellite phones, scanners, and printers.
We sell our encryption  products  directly to end-users and through  dealers and
distributors.


                                       7
<PAGE>

     We are also  continuing our research and  development  work on our electron
emission  display ("Flat CRT")  technology.  We have been  developing a Flat CRT
display  based on our thin film  technology  ("TFT") and have  produced Flat CRT
displays containing TFT color matrix structures.

Funding and Management's Plans
------------------------------

     From our inception, we have met our liquidity and capital expenditure needs
primarily  through the proceeds from sales of common stock in our initial public
offering, in private placements,  upon exercise of warrants issued in connection
with the private placements and public offering,  and upon the exercise of stock
options.  In  2001  and  2002,  we also  received  payments  under a  technology
development agreement.  In addition,  commencing in the fourth quarter of fiscal
1999, we began to generate cash flows from sales of our encryption products.

     During the nine months ended July 31, 2005, our operating  activities  used
approximately  $1,296,000  in cash.  This  resulted  from payments to suppliers,
employees and consultants of approximately $1,676,000,  which was offset by cash
of  approximately  $370,000  received from  collections  of accounts  receivable
related to sales of encryption  products and  approximately  $10,000 of interest
income received. In addition, we received approximately  $1,276,000 in cash upon
the exercise of stock  options,  invested  approximately  $398,000 in short-term
investments  consisting of certificates  of deposit and purchased  approximately
$3,000 of equipment. As a result, our cash and cash equivalents at July 31, 2005
decreased to approximately $582,000 from approximately  $1,003,000 at the end of
fiscal 2004 and short-term  investments  consisting of  certificates  of deposit
increased  to  approximately  $398,000  at July 31,  2005  from $0 at the end of
fiscal 2004.

     We believe that our existing cash, cash equivalents, short-term investments
and  accounts  receivable,  together  with cash  flows  from  expected  sales of
encryption products and flat panel displays, and other potential sources of cash
flows,  will be sufficient to enable us to continue in operation  until at least
the end of the third quarter of fiscal 2006. We anticipate that, thereafter,  we
will  require  additional  funds to  continue  our  marketing,  production,  and
research and development activities, and we will require outside funding if cash
generated from operations is insufficient to satisfy our liquidity requirements.
However,  our  projections  of future  cash needs and cash flows may differ from
actual  results.  If current cash and cash that may be generated from operations
are insufficient to satisfy our liquidity requirements, we may seek to sell debt
or equity securities or to obtain a line of credit prior to the third quarter of
fiscal 2006. The sale of additional  equity securities or convertible debt could
result in dilution to our  stockholders.  We currently have no arrangements with
respect to additional financing. There can be no assurance that we will generate
sufficient  revenues in the future  (through  sales or otherwise) to improve our
liquidity or sustain future operations, that our production capabilities will be
adequate,  that other products will not be produced by other companies that will
render  our  products  obsolete,  or that  other  sources  of  funding  would be
available, if needed, on favorable terms or at all.

     The  auditor's  report on our  financial  statements as of October 31, 2004
states that the net loss incurred  during the year ended  October 31, 2004,  our
accumulated  deficit as of that date, and the other factors  described in Note 1
to the Financial  Statements  included in our Annual Report on Form 10-K for the
year ended  October  31,  2004,  raise  substantial  doubt  about our ability to
continue as a going concern.  The auditor's  report on our financial  statements
for the year ended October 31, 2003 contained a similar statement. Our financial
statements  have been prepared  assuming we will continue as a going concern and
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.


                                       8
<PAGE>

2.   STOCK-BASED COMPENSATION
     ------------------------

     Financial  Accounting  Standards  Board  ("FASB")  Statement  of  Financial
Accounting   Standards   ("SFAS")   No.   148,   "Accounting   for   Stock-Based
Compensation-Transition  and Disclosure" ("SFAS No. 148"),  addresses  financial
accounting  and  reporting  for  recording  expenses for the fair value of stock
options.  SFAS No. 148 requires  prominent  disclosures in financial  statements
about the effects of stock-based  compensation and provides  alternative methods
of  transition  for a voluntary  change to fair value based method of accounting
for stock-based employee compensation.  SFAS No. 123 "Accounting for Stock Based
Compensation"  ("SFAS No.  123")  encourages  but does not require  companies to
record  compensation cost for stock-based  employee  compensation  plans at fair
value. We account for stock options granted to employees and directors using the
intrinsic value method prescribed in Accounting Principles Board ("APB") Opinion
No. 25  "Accounting  for Stock Issued to  Employees"  ("APB Opinion No. 25") and
comply  with  the  disclosure  provisions  of SFAS No.  123 and  SFAS  No.  148.
Compensation  cost for  stock  options  issued to  employees  and  directors  is
measured as the excess,  if any, of the quoted  market price of our stock at the
date of grant over the amount an employee  or  director  must pay to acquire the
stock.  In  accordance  with APB  Opinion  No.  25, we have not  recognized  any
compensation  cost, as all option  grants to employees  and directors  have been
made at the fair market value of our stock on the date of grant.

     Had compensation  cost for stock options granted to employees and directors
been  determined at fair value,  consistent  with SFAS No. 123, our net loss and
net loss per share would have increased to the following adjusted amounts:
<TABLE>
<CAPTION>
                                                     For the Nine Months               For the Three Months
                                                        Ended July 31,                    Ended July 31,
                                                --------------------------------  --------------------------------
                                                      2005             2004             2005             2004
                                                ---------------  ---------------  ---------------  ---------------
<S>                                             <C>              <C>              <C>              <C>
Net loss as reported                            $   (3,305,542)  $   (2,538,466)  $   (1,119,053)  $   (1,034,212)
Add: Total stock-based employee
  compensation expense, determined
  under fair value based method, for
  all awards, net of related tax effect             (2,017,510)      (1,272,801)        (287,376)        (910,758)
                                                ---------------  ---------------  ---------------  ---------------

Net loss as adjusted                            $   (5,323,052)  $   (3,811,267)  $   (1,406,429)  $   (1,944,970)
                                                ===============  ===============  ===============  ===============

Net loss per share, basic and diluted:
  As reported                                          $ (0.04)         $ (0.03)         $ (0.01)         $ (0.01)
                                                       ========         ========         ========         ========
  As adjusted                                          $ (0.06)         $ (0.05)         $ (0.02)         $ (0.02)
                                                       ========         ========         ========         ========
</TABLE>

     The fair value of each option grant is estimated at the date of grant using
the   Black-Scholes   option  pricing  model.  The  following   weighted-average
assumptions  were used for grants during the nine months ended July 31, 2005 and
2004: risk free interest rates of 3.45% and 2.53%;  expected  dividend yields of
0% for both periods;  expected lives of 2.50 years and 2.48 years;  and expected
stock price  volatility  of 109% and 123%.  The  weighted  average fair value of
options  granted  under SFAS No. 123 for the nine months ended July 31, 2005 and
2004 was $0.38 and $0.42.


                                       9
<PAGE>

     During the  nine-month  periods ended July 31, 2005 and 2004, we granted to
employees,  directors and consultants  options to purchase  5,390,000 shares and
3,340,000  shares,  respectively,  pursuant  to the  CopyTele,  Inc.  2003 Share
Incentive Plan (the "2003 Share Plan"). During the nine-month periods ended July
31, 2005 and 2004,  stock  options to purchase  2,313,800  shares and  1,706,000
shares,  respectively,  were exercised, with aggregate proceeds of approximately
$1,276,000 and $836,000, respectively.

     We account for options granted to non-employee  consultants  using the fair
value method required by SFAS No. 123. Consulting expense for options granted to
consultants,  recognized  during the nine-month  periods ended July 31, 2005 and
2004,  was  approximately  $45,000 and  $132,000,  respectively,  and during the
three-month  periods  ended July 31,  2005 and 2004,  was  approximately  $0 and
$115,000,  respectively.  Such consulting expense is included in either research
and development  expenses or selling,  general and administrative  expenses,  as
applicable, in the accompanying statements of operations.

     During  the  nine-month  periods  ended July 31,  2005 and 2004,  we issued
2,417,715 shares and 2,102,250 shares, respectively,  of common stock to certain
employees  for  services  rendered,  principally  in lieu of cash  compensation,
pursuant  to the 2003 Share  Plan.  We  recorded  compensation  expense  for the
nine-month periods ended July 31, 2005 and 2004 of approximately  $1,453,000 and
$1,175,000,  respectively,  and for the three-month  periods ended July 31, 2005
and 2004 of approximately $443,000 and $463,000, respectively, for the shares of
common stock issued to employees.  In addition,  during the  nine-month  periods
ended  July 31,  2005 and 2004,  we issued  45,000  shares and  628,860  shares,
respectively,  of common stock to consultants for services  rendered pursuant to
the 2003 Share Plan. We recorded  consulting  expense for the nine-month periods
ended  July  31,  2005  and  2004  of   approximately   $30,000  and   $328,000,
respectively,  and for the  three-month  periods ended July 31, 2005 and 2004 of
approximately $7,000 and $91,000,  respectively,  for the shares of common stock
issued to consultants.

     As of July 31, 2005, 4,753,414 shares and 45,773 shares, respectively, were
available  for future  grants under the 2003 Share Plan and the  CopyTele,  Inc.
2000 Share Incentive Plan.

     During the nine-month  period ended July 31, 2005, we issued 179,000 shares
of  restricted  common stock to our outside  legal  counsel in  satisfaction  of
outstanding bills for services rendered in the amount of approximately $115,000.

     In  December  2004,  the FASB  issued  SFAS  No.  123(R),  "Accounting  for
Stock-Based  Compensation"  ("SFAS No.  123(R)").  SFAS No.  123(R)  establishes
standards for the accounting for  transactions in which an entity  exchanges its
equity  instruments for goods or services.  This Statement  focuses primarily on
accounting  for  transactions  in which an entity obtains  employee  services in
share-based payment  transactions.  SFAS No. 123(R) requires that the fair value


                                       10
<PAGE>

of such  equity  instruments  be  recognized  as an  expense  in the  historical
financial  statements as services are performed.  Prior to SFAS No. 123(R), only
certain pro forma  disclosures  of fair value were  required.  The provisions of
this Statement were effective for the first interim  reporting  period beginning
after June 15, 2005.  In April 2005,  the  Securities  and  Exchange  Commission
announced a deferral of the  effective  date of SFAS No.  123(R) until the first
interim reporting period of the first fiscal year beginning after June 15. 2005.
Accordingly,  we will adopt SFAS No. 123(R)  commencing  with the quarter ending
January 31, 2006. We are currently evaluating the effect of SFAS No. 123(R). The
adoption  of SFAS No.  123(R)  is  expected  to have a  material  effect  on our
financial statements.

3.   CONCENTRATION OF CREDIT RISK
     ----------------------------

     Financial  instruments that  potentially  subject us to  concentrations  of
credit  risk  consist  principally  of  accounts  receivable  from  sales in the
ordinary  course of business.  Management  reviews our accounts  receivable  and
other receivables for potential doubtful accounts and maintains an allowance for
estimated  uncollectible  amounts.  Generally,  no  collateral  is received from
customers  for our accounts  receivable.  At July 31, 2005,  one customer in the
Encryption  Products  and  Services  Segment  represented  96% of  net  accounts
receivable.  At October 31, 2004, two customers in the  Encryption  Products and
Services  Segment  represented  48%  and  44%,  respectively,  of  net  accounts
receivable.  During the nine months  ended July 31,  2005,  one  customer in the
Encryption  Products and Services Segment represented 78% of total net revenues.
During the nine months ended July 31,  2004,  two  customers  in the  Encryption
Products and Services Segment  represented 59% and 26%,  respectively,  of total
net revenues.

4.   SHORT-TERM INVESTMENTS
     ----------------------

     Short-term  investments  represent  certificates  of  deposits,  carried at
amortized cost,  with maturities of less than twelve months.  The fair values of
the certificates of deposits,  including  accrued  interest,  approximate  their
carrying value due to their short maturities.

5.   OTHER RECEIVABLES
     -----------------

     In May and June 2002, we received  restricted  common stock from a customer
in connection with an outstanding accounts receivable of approximately  $323,000
and anticipated  settling this accounts  receivable through the ultimate sale of
the  common  stock.  This  customer  has agreed  with us to cure any  deficiency
between the  proceeds  from the sale of the common  stock and the balance of the
outstanding   accounts  receivable.   In  addition,   the  customer's  principal
shareholder  has personally  agreed to cure any deficiency in the event that the
customer  defaults on its  agreement  to cure such  deficiency,  up to $292,000.
During the nine months ended July 31, 2005,  we received  aggregate  proceeds of
approximately $15,000 from the sale of a portion of the common stock. As of July
31,  2005,  we  hold  200,000  shares  of  such  common  stock,  subject  to  no
restrictions,  with a fair value of approximately $50,000, and we intend to sell
the  remaining  portion  of such  stock  during  the next  twelve  months.  This
receivable is stated at management's estimate of its net realizable value.


                                       11
<PAGE>

6.   INVENTORIES
     -----------

     Inventories consist of the following as of:
                                                       July 31,      October 31,
                                                         2005           2004
                                                     ------------   ------------
       Component parts                               $   205,402    $   304,862
       Work-in-process                                    28,990        114,075
       Finished products                                 320,628        580,492
                                                     ------------   ------------
                                                     $   555,020    $   999,429
                                                     ============   ============

7.   NET INCOME (LOSS) PER SHARE OF COMMON STOCK
     -------------------------------------------

     We comply with the provisions of SFAS No. 128,  "Earnings Per Share" ("SFAS
No. 128").  In accordance  with SFAS No. 128, basic net income (loss) per common
share  ("Basic  EPS") is computed by dividing net income  (loss) by the weighted
average  number of common  shares  outstanding.  Diluted  net income  (loss) per
common share  ("Diluted  EPS") is computed by dividing net income  (loss) by the
weighted  average number of common shares and dilutive common share  equivalents
and  convertible  securities  then  outstanding.  Diluted  EPS for  all  periods
presented  is the same as Basic EPS,  as the  inclusion  of the effect of common
stock  equivalents then  outstanding  would be  anti-dilutive.  For this reason,
excluded from the  calculation of Diluted EPS for the  nine-month  periods ended
July  31,  2005 and  2004,  were  options  to  purchase  20,127,246  shares  and
16,252,546 shares, respectively.

8.   SEGMENT INFORMATION
     -------------------

     We follow the provisions of SFAS No. 131, "Disclosures about Segments of an
Enterprise  and Related  Information"  ("SFAS No.  131").  Reportable  operating
segments are determined based on management`s approach. The management approach,
as  defined  by SFAS No.  131,  is based  on the way  that the  chief  operating
decision-maker  organizes the segments within an enterprise for making operating
decisions  and  assessing  performance.  While our  results  of  operations  are
primarily reviewed on a consolidated  basis, the chief operating  decision-maker
also manages the  enterprise in two segments:  (i)  Flat-panel  display and (ii)
Encryption  products and services.  The following  represents selected financial
information  for our segments for the nine-month and  three-month  periods ended
July 31, 2005 and 2004:
<TABLE>
<CAPTION>

                                                                  Encryption Products
            Segment Data                   Flat-Panel Display         and Services               Total
---------------------------------------   --------------------   ----------------------   -------------------
<S>                                         <C>                    <C>                      <C>
Nine Months Ended July 31, 2005:
  Revenue                                   $       -              $    391,425             $    391,425
  Net loss                                    (1,310,575)            (1,994,967)              (3,305,542)

Nine Months Ended July 31, 2004:
  Revenue                                   $       -              $    357,251             $    357,251
  Net loss                                    (1,452,496)            (1,085,970)              (2,538,466)
</TABLE>


                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                  Encryption Products
            Segment Data                   Flat-Panel Display         and Services               Total
---------------------------------------   --------------------   ----------------------   -------------------
<S>                                         <C>                    <C>                      <C>
Three Months Ended July 31, 2005:
  Revenue                                   $       -              $    132,125             $    132,125
  Net loss                                      (362,455)              (756,598)              (1,119,053)

Three Months Ended July 31, 2004:
  Revenue                                   $       -              $    216,447             $    216,447
  Net loss                                      (715,151)              (319,061)              (1,034,212)
</TABLE>






                                       13
<PAGE>


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
of Operations.
--------------

GENERAL
-------

     Our principal  operations are the development,  production and marketing of
multi-functional  hardware and software based  encryption  products that provide
information  security for domestic and international  users over virtually every
communications media and the development, production and marketing of thin, high
brightness, flat panel video displays ("Flat CRT").

     We  currently  have 18  different  products  in our line of  hardware-based
encryption  solutions.  Our encryption products are  multi-functional,  hardware
based digital  encryption  systems that provide  high-grade  voice, fax and data
encryption using either the Citadel(TM) CCX encryption cryptographic chip (which
is  manufactured  by the Harris  Corporation) or the Triple DES or AES algorithm
(algorithms  available  in the  public  domain  which  are  used  by  many  U.S.
government agencies). In addition, we have developed two software-based security
products,  one of which  uses  either the  Triple  DES or the AES  algorithm  to
encrypt data files and e-mail  attachments in both desktop and laptop  computers
utilizing  Microsoft  Windows  operating  systems,  and the  other of which  can
encrypt voice and data in cellular and satellite phones, scanners, and printers.
We sell our encryption  products  directly to end-users and through  dealers and
distributors.

     We have  developed  modifications  of our  standard  products  for specific
applications.  We have developed and are producing several products for use with
the satellite  communications  network of Thuraya  Satellite  Telecommunications
Company  ("Thuraya"),  located in Abu Dhabi,  United Arab Emirates.  The Thuraya
network was built by Boeing  Satellite  Systems,  Inc.  ("Boeing")  and provides
communication in Europe,  Africa, Russia, the Middle East and Asia. Our products
can encrypt voice  communication,  using a compact  encrypted module attached to
the Thuraya  handset,  and  automatically  encrypt fax  communications  over the
Thuraya  network.  Our  products  thus  enable  the  Thuraya  network to provide
encrypted  communications  between  satellite  phones,  from satellite phones to
desk-based phones, or between desk-based phones. Additionally, we have developed
three  products to provide  satellite  and cellular fax  encryption  between fax
machines and between computers and fax machines.

     In April  2004,  we entered  into an  agreement  with Boeing to provide our
encryption  products for use over the Thuraya  network.  Under a September  2004
modification to the agreement,  Boeing is the exclusive  distributor of eight of
our products.

     In connection with Boeing becoming the exclusive distributor of some of our
products,  Boeing  authorized  us to use its name on our  website.  Accordingly,
customers  desiring to purchase such products can find  authorized  Boeing sales
information on the "Encryption  Products" page of our website.  In January 2005,
Boeing introduced,  demonstrated and began marketing our encryption  products to
more  than  100  Thuraya  service  providers.   We  assisted  Boeing  with  such
demonstrations.  The products  introduced  included two new encryption  products
that we are selling to Boeing, the Thuraya DCS-1400 for voice encryption and the
Thuraya USS-900T for fax encryption  between fax machines.  In February 2005, we
started selling to Boeing the USS-900TC,  which provides  satellite and cellular
fax encryption  between  computers and fax machines.  These products contain the
brand name of Thuraya and their operating controls are in the Arabic language.


                                       14
<PAGE>

     Thuraya has included 13 of our  encryption  solutions sold by Boeing on the
Boeing             page            of             Thuraya's             website,
http://www.thuraya.com/country/int_sp/boeing/products.htm. Our products are also
being marketed by another of Thuraya's  international  service  providers,  Fort
Info  Technology  FZC,  located in Dubai,  United Arab Emirates.  Our encryption
solutions are listed on Fort Info Technology's website,  www.forttel.com,  under
Secure Communications.

     We have also  developed  a method  for  encrypting  Short  Message  Service
("SMS"), an inexpensive text message communication protocol that is used in many
cellular and  satellite  phones.  We will utilize  this  encryption  solution in
conjunction with the Thuraya handsets.

     Our wireless encryption  products are providing secure  communications with
many  different  satellite  phones,  including  the Thuraya  7100/7101  handheld
terminal ("HHT"),  Globalstar  GPS-1600 HHT, Telit  SAT-550/600 HHT,  Globalstar
GPS-2800/2900  fixed phone,  Iridium 9500/9505 HHT, Inmarsat M4 and Mini "M" HHT
units from Thrane & Thrane and Nera. Through the use of our products,  encrypted
satellite communications are available for many Thuraya docking units, including
Teknobli's Next Thuraya Docker,  Thuraya Fixed Docking Adapter,  APsi's FDU-2500
Fixed  Docking  Unit,  Sattrans'  SAT-OFFICE  Fixed  Docking  Unit  and  SAT-VDA
Hands-Free Car Kit.

     We also have developed  modifications  of our standard  equipment for other
applications.  We have  provided  modifications  of our  hardware  and  software
encryption  solutions to several large  organizations  which are  evaluating our
products in connection with their security  requirements.  We are supplying to a
major U.S. defense contractor our USS-900AF  automatic fax encryption product to
secure its worldwide fax  communication.  We have entered into an agreement with
another major U.S.  company and supplied an initial proof of concept  encryption
solution utilizing another of our products that has been configured to interface
with  that  company's  satellite  global  positioning  system  ("GPS")  and data
communication fleet management network.

     We have  supplied  another  major U.S.  company our USS-900AF to secure fax
communication of personal medical records. We are also providing the DCS-1700 to
several U.S. companies to secure the data links between scanners,  servers,  and
printers in multi-functional products.

     We are also  continuing our research and  development  work on our Flat CRT
electron emission display  technology.  We have provided our model CTVD-101 Flat
CRT display to a potential customer for evaluation of the display's  performance
in a product  which must  operate over a wide  ambient  temperature  range in an
outdoor  environment.  After  successfully  testing our  display,  the  customer
ordered a seed quantity of modules  containing  our display,  to replace  liquid
crystal  display ("LCD")  modules in our customer's  product.  We have initially
supplied the customer with model CTVD-101  displays.  To be able to supply large
quantities of displays to this customer and other potential customers,  however,
we are planning to produce our  monochrome  CTVD-201 and color CTVD-202 Flat CRT
displays,  which are based on our more  current  thin film  technology  ("TFT"),
rather than the  CTVD-101.  We are  planning to replace  the  CTVD-101  displays
previously  provided to our customer with CTVD-201  displays for our  customer's
evaluation.


                                       15
<PAGE>

     We entered into an agreement,  in June 2004,  with an Asian company,  which
currently mass produces TFT LCDs, to jointly produce  prototypes of two modified
TFT color matrix  pixel  structures  for our Flat CRT display  based on our high
brightness technology. The two color matrix structures,  which are components of
our  displays,  are a 7-inch  (diagonal)  with 1440 x 234  pixels and a 5.5 inch
(diagonal) with 960 x 234 pixels.  As part of our TFT color matrix design,  each
pixel contains  memory to achieve high brightness at video rates. We have funded
the development of these prototypes,  and may enter into a further agreement for
commercial  production of the  structures or the complete  color  displays.  The
company has agreed to produce such structures only for us.

     We have  developed,  with the  assistance of Volga Svet Ltd.  ("Volga"),  a
Russian display company that we have been working with for  approximately  eight
years,  our Model  CTVD-201  and Model  CTVD-202  displays,  which  contain  the
modified TFT color matrix  structures we received  under our agreement  with the
Asian company.  The Model CTVD-201  display is a 5.5 inch (diagonal)  monochrome
display  with 320 x 234 pixels and the Model  CTVD-202 is a 5.5 inch  (diagonal)
color display with 960 x 234 pixels.  We are also  completing  the assembly of a
7.0 inch (diagonal)  prototype color display containing the initial modified TFT
color matrix structures with 1,440 x 234 pixels.  The Asian company has supplied
several  hundred of the initial  modified  TFT color matrix  structures  for the
CTVD-201 and  CTVD-202.  We produced the  CTVD-201 and CTVD-202  displays  which
contain  these  initial  modified  color  matrix   structures  to  evaluate  the
performance and reliability of our displays.

     We have successfully tested our display modules under various environmental
conditions.  This included  subjecting our display modules to shock,  vibration,
and operating temperatures from -40(degree)C to +85(degree). Our display modules
are also capable of operating under both sunlight and nighttime conditions. As a
result,  we believe that our display modules can meet  performance  requirements
for both outdoor and indoor applications.  We have also successfully reduced the
operating  voltage  requirements  of our display  modules to further improve the
reliability and extend the life of our displays.

     As a result  of our  reliability  testing  and  evaluation  of the  display
performance  characteristics,  we have  developed a new  TFT-based  pixel matrix
electron  control system  ("PMECS").  PMECS utilizes our unique low  temperature
sealing  and  vacuuming  technology,  can  operate  with  virtually  any type of
electron  emission  system,  has gray scale and color  capability,  and consumes
substantially  less power than LCD or plasma  displays.  In addition,  PMECS, in
conjunction with our electron emission  technologies,  is applicable to any size
display  from small  hand-held  devices to large  HDTV  products  that are being
produced in TFT LCD  production  facilities.  We believe  that Flat CRT displays
with PMECS  could  potentially  have a cost  similar to a CRT and thus less than
current LCD or Plasma displays.

     The Asian company has supplied us with 5.5 inch (diagonal) TFT color matrix
structures with 960 x 234 pixels which incorporate  PMECS. We are now producing,
with the assistance of Volga,  both  monochrome and color displays with PMECS in
combination with our proprietary electron emission technologies.  These emission


                                       16
<PAGE>

technologies, which include carbon nanotubes, both reflective and non-reflective
planar edge, and thin filaments,  are suitable for different display application
requirements.  In  particular,  we  are  incorporating,   in  our  displays,  in
conjunction with PMECS, our low power carbon nanotube  electron emission system.
These nanotubes are extremely small carbon elements,  approximately  2,500 times
thinner than the width of a human hair, that emit electrons  under  controllable
conditions.

     In addition to using our own election emission technologies as a source for
a low power electron  emission  system to be used in conjunction  with PMECS, we
are also  working  with two U.S.  companies  to utilize  their  carbon  nanotube
technologies.  One company is supplying  us with its low power  carbon  nanotube
electron  system,  which we are  incorporating  with PMECS to produce a 5.5 inch
diagonal display. The other company is developing,  exclusively for us, an array
of low voltage and power controllable carbon nanotubes for electron emission.

     We  have  also  designed  PMECS  to  incorporate   chip  on  glass  ("COG")
technology,  which will be utilized for mass production of these displays.  Upon
the completion of our display  utilizing this design, we believe that Volga will
be able to initially supply a limited quantity of production displays.  Volga is
in the process of  evaluating  its  equipment  requirements  to mass produce the
displays.  We anticipate utilizing either the Asian company,  Volga or other TFT
LCD  production  companies  to mass  produce the display  for  potential  users.
However,  we have not yet entered into any agreement  for such mass  production,
and there can be no assurance that we can do so on commercially acceptable terms
or at all.

     Earlier  this year,  we  exhibited  our Flat CRT display at the Society for
Information Display International Symposium, Seminar and Exhibition, the premier
international  gathering of scientists,  engineers,  manufacturers and users for
the  discussion,  presentation,  viewing and exhibiting of  information  display
technology with more than 250 exhibits.  We demonstrated our 5.5 inch (diagonal)
display with 320 x 234 pixels and our 5.0 inch (diagonal) display with 320 x 240
pixels to  scientists,  engineers,  manufacturers  and users  from more than one
hundred companies and government agencies.  We are following up with a number of
companies  that  expressed  an  interest in  utilizing  our  displays  for their
products.  In particular,  we have  demonstrated  our 5.5 inch (diagonal)  color
display with 960 x 234 pixels to two companies and are in discussions with those
companies regarding utilizing our display technology.

     There can be no assurance that we can produce  commercial quality displays,
that  we can  produce  such  displays  in  commercial  quantities,  that  we can
successfully  market our displays,  or of the revenue we might derive from sales
of our displays.

     Our  operations  and  the  achievement  of  our  objectives  in  marketing,
production,  and research and  development  are dependent  upon an adequate cash
flow.  Accordingly,   in  monitoring  our  financial  position  and  results  of
operations,  particular  attention  is  given to cash  and  accounts  receivable
balances and cash flows from operations.  Since our initial public offering, our
cash flows have been  primarily  generated  through the sales of common stock in
private  placements  and upon exercise of stock  options.  We also generate cash
flows from sales of our encryption products.  In an effort to generate sales, we
have  marketed  our  encryption  products  directly  to U.S.  and  international


                                       17
<PAGE>

distributors,  dealers  and  original  equipment  manufacturers  that market our
encryption  products  and to  end-users.  We have also been working with several
large  organizations  to  provide  them  with  both our  hardware  and  software
encryption  solutions  for them to  evaluate  whether the  solutions  meet their
security requirements and have begun supplying several major U.S. companies with
our  encryption  products.  We have also begun to market  our flat  panel  video
display products to potential  purchasers for incorporation into their products.
We anticipate  that current cash on hand,  cash generated from  operations,  and
cash  generated  from the exercise of employee  options will be adequate to fund
our operations at least through the end of the third quarter of fiscal 2006.


CRITICAL ACCOUNTING POLICES
---------------------------

     Our  financial  statements  are  prepared  in  conformity  with  accounting
principles  generally accepted in the United States of America.  As such, we are
required to make certain  estimates,  judgments and assumptions  that management
believes are reasonable  based upon the information  available.  These estimates
and  assumptions  affect the reported  amounts of assets and liabilities and the
disclosure of contingent  assets and  liabilities  at the dates of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods.

     We  believe  the  following  critical  accounting  polices  affect the more
significant  judgments and estimates  used in the  preparation  of our financial
statements.  For  additional  discussion on the  application  of these and other
accounting polices, refer to the financial statements and notes thereto included
in our Annual Report on Form 10-K for the year ended October 31, 2004.

Revenue Recognition
-------------------

     Sales
     -----

          Revenues  from  sales  are  recorded  when all  four of the  following
     criteria are met: (i) persuasive  evidence of an arrangement  exists;  (ii)
     delivery  has  occurred  and title has  transferred  or services  have been
     rendered;  (iii) our price to the buyer is fixed or determinable;  and (iv)
     collectibility is reasonably assured.

     Sales Returns and Allowances
     ----------------------------

          Revenues are recorded net of estimated sales returns.

Inventories
-----------

     Inventories are stated at the lower of cost, including material,  labor and
overhead, determined on a first-in, first-out basis, or market, which represents
our best estimate of market value. We regularly review  inventory  quantities on
hand,  particularly  finished  goods,  and  record a  provision  for  excess and
obsolete inventory based primarily on forecasts of future product demand. During
the  nine-month  period ended July 31, 2005,  we recorded a provision for excess
inventory due to changes in product requirements of approximately  $438,000. Our
net  income  (loss)  is  directly  affected  by  management's  estimate  of  the
realizability of inventories.  To date, sales of our products have been limited.
Accordingly,  there can be no  assurance  that we will not be required to reduce
the selling price of our inventory below our current carrying value.


                                       18
<PAGE>

Stock Based Compensation
------------------------

     We account for stock options  granted to employees and directors  using the
intrinsic  value method  prescribed in APB Opinion No. 25 "Accounting  for Stock
Issued to Employees"  and comply with the  disclosure  provision of SFAS No. 123
"Accounting for Stock Based Compensation" and SFAS No. 148 "Accounting for Stock
Based  Compensation - Transition and Disclosure,  an amendment of SFAS No. 123".
If we were to include  the cost of employee  stock  option  compensation  in the
financial  statements,  our net loss for the  nine-month  periods ended July 31,
2005 and 2004 would have increased by  approximately  $2,018,000 and $1,273,000,
respectively, and for the three-month periods ended July 31, 2005 and 2004 would
have increased by approximately  $287,000 and $911,000,  respectively,  based on
the fair value of the stock options granted to employees. See "-Impact of Recent
Accounting Pronouncements."


RESULTS OF OPERATIONS
---------------------

Nine months ended July 31, 2005 compared with nine months ended July 31, 2004
-----------------------------------------------------------------------------

     Sales

     Revenue.  Revenue  from sales  increased  by  approximately  $34,000 in the
nine-month period ended July 31, 2005, to approximately $391,000, as compared to
approximately  $357,000 in the comparable  prior-year period. All revenue during
both periods was from encryption products and services.  The increase in revenue
from sales  resulted  from an increase in revenue  from  encryption  services of
approximately  $60,000,  offset by a  reduction  in unit sales of  approximately
$26,000.  Our encryption sales have been limited and are sensitive to individual
large transactions which can vary from period to period. We believe that changes
in sales between  periods  generally  represent the nature of the early stage of
our product and sales channel development.


     Gross Profit  (Loss).  Gross profit from sales of  encryption  products and
services decreased by approximately $392,000 in the nine-month period ended July
31, 2005, to a loss of approximately  $164,000, as compared to a gross profit of
approximately  $228,000 in the  comparable  prior-year  period.  The decrease in
gross profit is primarily the result of the  provision for excess  inventory due
to changes in product  requirements of  approximately  $438,000  recorded in the
nine-month  period ended July 31, 2005.  Gross profit as a percent of revenue in
the nine-month  period ended July 31, 2004 was  approximately  64%. Gross profit
(loss) as a percent of revenue in the  nine-month  period ended July 31, 2005 is
not  meaningful  due to the  inventory  adjustment  recorded  during the period.
Because of the limited number of transactions during each of the periods,  gross
profit percentages, excluding the effect of inventory adjustments, are sensitive
to individual transactions.


                                       19
<PAGE>

     Research and Development Expenses

     Research and development  expenses decreased by approximately $7,000 in the
nine-month  period  ended  July 31,  2005,  to  approximately  $1,725,000,  from
approximately  $1,732,000 in the comparable  prior-year  period. The decrease in
research  and  development  expenses  was  principally  due  to  a  decrease  of
approximately  $231,000 in outside research and development  expense relating to
our development of modified TFT technology for our flat panel  displays,  offset
by an increase  in employee  compensation  and  related  costs of  approximately
$221,000, primarily resulting from the grant of employee bonuses.

     Selling, General and Administrative Expenses

     Selling,  general and  administrative  expenses  increased by approximately
$390,000 to  approximately  $1,427,000 in the  nine-month  period ended July 31,
2005, from  approximately  $1,037,000 in the comparable  prior-year  period. The
increase in selling,  general and administrative expenses was principally due to
an  increase  in  professional  fees of  approximately  $263,000,  approximately
$50,000 of which was incurred with respect to a theft by a former  employee (see
"-Investigation  and Recovery Efforts  Regarding  Misappropriated  Funds" in our
Annual  Report on Form 10-K for the fiscal  year ended  October  31,  2004),  an
increase in employee  compensation and related costs of  approximately  $96,000
and  the  recovery  in  the  prior  year  of  previously   reserved  amounts  of
approximately  $73,000,  offset  by a  reduction  of  approximately  $37,000  in
consulting expense for stock options issued to consultants.

     Interest Income

     Interest income was  approximately  $10,000 in nine-month period ended July
31, 2005, compared to approximately $3,000 in the comparable  prior-year period.
The increase in interest  income was the result of an increase in average  funds
available for investment and an increase in prevailing interest rates.

Three months ended July 31, 2005 compared with three months ended July 31, 2004
-------------------------------------------------------------------------------

     Sales

     Revenue.  Revenue  from sales  decreased  by  approximately  $84,000 in the
three-month period ended July 31, 2005, to approximately  $132,000,  as compared
to  approximately  $216,000 in the  comparable  prior-year  period.  All revenue
during both periods was from encryption  products and services.  The decrease in
revenue  from  sales was  principally  due to a  decrease  in unit  sales of our
encryption  products of approximately  $144,000 related to customer  procurement
delays,   offset  by  an  increase  in  revenue  from  encryption   services  of
approximately  $60,000. Our encryption sales have been limited and are sensitive
to  individual  large  transactions  which can vary from  period to  period.  We
believe that changes in sales between periods generally  represent the nature of
the early stage of our product and sales channel development.

     Gross Profit  (Loss).  Gross profit from sales of  encryption  products and
services  decreased by  approximately  $356,000 in the three-month  period ended
July 31,  2005,  to a loss of  approximately  $223,000,  as  compared to a gross


                                       20
<PAGE>

profit of  approximately  $133,000  in the  comparable  prior-year  period.  The
decrease in gross profit is  primarily  the result of the  provision  for excess
inventory  due to changes  in product  requirements  of  approximately  $313,000
recorded  in the  three-month  period  ended July 31,  2005.  Gross  profit as a
percent  of  revenue  in  the  three-month   period  ended  July  31,  2004  was
approximately  62%.  Gross  profit  (loss)  as  a  percent  of  revenue  in  the
three-month  period ended July 31, 2005 is not  meaningful  due to the inventory
adjustment  recorded  during  the  period.  Because  of the  limited  number  of
transactions during each of the periods, gross profit percentages, excluding the
effect of inventory adjustments, are sensitive to individual transactions.

     Research and Development Expenses

     Research and development  expenses  decreased by approximately  $256,000 in
the  three-month  period ended July 31, 2005, to  approximately  $485,000,  from
approximately  $741,000 in the  comparable  prior-year  period.  The decrease in
research  and  development  expenses  was  principally  due  to  a  decrease  of
approximately  $212,000 in outside research and development  expense relating to
our  development  of modified TFT  technology  for our flat panel displays and a
decrease in employee compensation and related costs of approximately $26,000.

     Selling, General and Administrative Expenses

     Selling,  general and  administrative  expenses  decreased by approximately
$12,000 to approximately $415,000 in the three-month period ended July 31, 2005,
from approximately $427,000 in the comparable prior-year period. The decrease in
selling,  general and administrative expenses was principally due to a reduction
in  consulting  expense  of  approximately  $89,000, offset  by an  increase  in
professional  fees of approximately  $34,000,  the recovery in the prior year of
previously reserved amounts of approximately $20,000 and an increase in employee
compensation and related costs of approximately $16,000.

     Interest Income

     Interest income was approximately  $4,000 in three-month  period ended July
31, 2005, compared to approximately $1,000 in the comparable  prior-year period.
The increase in interest  income was the result of an increase in average  funds
available for investment and an increase in prevailing interest rates.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     From our inception, we have met our liquidity and capital expenditure needs
primarily  through the proceeds from sales of common stock in our initial public
offering, in private placements,  upon exercise of warrants issued in connection
with the private placements and public offering,  and upon the exercise of stock
options.  In  2001  and  2002,  we also  received  payments  under a  technology
development agreement.  In addition,  commencing in the fourth quarter of fiscal
1999, we began to generate cash flows from sales of our encryption products.


                                       21
<PAGE>

     During the nine months ended July 31, 2005, our operating  activities  used
approximately  $1,296,000  in cash.  This  resulted  from payments to suppliers,
employees and consultants of approximately $1,676,000,  which was offset by cash
of  approximately  $370,000  received from  collections  of accounts  receivable
related to sales of encryption  products and  approximately  $10,000 of interest
income received. In addition, we received approximately  $1,276,000 in cash upon
the exercise of stock  options,  invested  approximately  $398,000 in short-term
investments  consisting of certificates  of deposit and purchased  approximately
$3,000 of equipment. As a result, our cash and cash equivalents at July 31, 2005
decreased to approximately $582,000 from approximately  $1,003,000 at the end of
fiscal 2004 and short-term  investments  consisting of  certificates  of deposit
increased  to  approximately  $398,000  at July 31,  2005  from $0 at the end of
fiscal 2004.

     Accounts receivable  increased by approximately  $32,000 from approximately
$63,000 at the end of fiscal 2004 to approximately $95,000 at July 31, 2005. The
increase in accounts receivable is a result of the timing of collections. During
the three  months  ended July 31,  2005,  we applied our  reserve  for  doubtful
accounts  against the underlying  receivable  (which related to one  slow-paying
customer). This had no effect on our net accounts receivable.  Other receivables
were  approximately  $78,000  at July  31,  2005,  representing  a  decrease  of
approximately  $6,000 from approximately  $84,000 at the end of fiscal 2004. The
decrease in other  receivables is a result of proceeds received of approximately
$15,000 from the sale of a portion of the common stock  received from a customer
to settle such  customer's  accounts  receivable,  offset by a reduction  of the
allowance  for  doubtful  accounts  related  to  this  accounts   receivable  of
approximately  $9,000.   Inventories  decreased   approximately   $444,000  from
approximately $999,000 at October 31, 2004 to approximately $555,000 at July 31,
2005,  as a result of the  timing of  shipments,  production  schedules  and the
provision  for  excess  inventory  due to changes  in  product  requirements  of
approximately  $438,000  recorded  during the  nine-month  period ended July 31,
2005.  Prepaid  expenses and other  current  assets  decreased by  approximately
$110,000 from approximately  $122,000 at the end of fiscal 2004 to approximately
$12,000 at July 31, 2005.  The decrease in prepaid  expenses and other assets is
primarily  due to the receipt of a receivable  of  approximately  $100,000  from
insurance companies related to a theft by a former employee (see "-Investigation
and Recovery Efforts  Regarding  Misappropriated  Funds" in our Annual Report on
Form 10-K for the fiscal year ended  October  31,  2004).  Accounts  payable and
accrued  liabilities  decreased by  approximately  $173,000  from  approximately
$443,000 at the end of fiscal 2004 to  approximately  $270,000 at July 31, 2005,
as a result of the issuance of restricted  common stock to settle a liability of
approximately $115,000 and the timing of payments.

     As a result of these changes, working capital at July 31, 2005 decreased to
approximately  $1,450,000  from  approximately  $1,829,000  at the end of fiscal
2004.

     Our working capital includes  inventory of  approximately  $555,000 at July
31, 2005.  Management  has  recorded  our  inventory at the lower of cost or our
current best estimate of net realizable  value.  To date,  sales of our products
have been limited.  Accordingly,  there can be no assurance  that we will not be
required to reduce the selling price of our inventory below our current carrying
value.


                                       22
<PAGE>

     During  the  nine-month  periods  ended July 31,  2005 and 2004,  we issued
shares of common stock to certain employees for services  rendered,  principally
in  lieu  of  cash  compensation.  We  recorded  compensation  expense  for  the
nine-month periods ended July 31, 2005 and 2004 of approximately  $1,453,000 and
$1,175,000,  respectively,  and for the three-month  periods ended July 31, 2005
and 2004 of approximately $443,000 and $463,000, respectively, for the shares of
common stock issued to  employees.  In addition  during the  nine-month  periods
ended July 31, 2005 and 2004,  we issued  shares of common stock to  consultants
for services rendered. We recorded consulting expense for the nine-month periods
ended  July  31,  2005  and  2004  of   approximately   $30,000  and   $328,000,
respectively,  and for the  three-month  periods ended July 31, 2005 and 2004 of
approximately $7,000 and $91,000,  respectively,  for the shares of common stock
issued to consultants. During the nine-month period ended July 31, 2005, we also
issued 179,000 shares of restricted common stock to our outside legal counsel in
satisfaction  of  outstanding  bills  for  services  rendered  in the  amount of
approximately $115,000.

     The  auditor's  report on our  financial  statements as of October 31, 2004
states that the net loss incurred  during the year ended  October 31, 2004,  our
accumulated  deficit as of that date, and the other factors  described in Note 1
to the Financial  Statements  included in our Annual Report on Form 10-K for the
year ended  October  31,  2004,  raise  substantial  doubt  about our ability to
continue as a going concern.  The auditor's  report on our financial  statements
for the year ended October 31, 2003 contained a similar statement. Our financial
statements  have been prepared  assuming we will continue as a going concern and
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.

     We believe that our existing cash, cash equivalents, short-term investments
and  accounts  receivable,  together  with cash  flows  from  expected  sales of
encryption products and flat panel displays, and other potential sources of cash
flows,  will be sufficient to enable us to continue in operation  until at least
the end of the third quarter of fiscal 2006. We anticipate that, thereafter,  we
will  require  additional  funds to  continue  our  marketing,  production,  and
research and development activities, and we will require outside funding if cash
generated from operations is insufficient to satisfy our liquidity requirements.
However,  our  projections  of future  cash needs and cash flows may differ from
actual  results.  If current cash and cash that may be generated from operations
are insufficient to satisfy our liquidity requirements, we may seek to sell debt
or equity securities or to obtain a line of credit prior to the third quarter of
fiscal 2006. The sale of additional  equity securities or convertible debt could
result in dilution to our  stockholders.  We currently have no arrangements with
respect to additional financing. There can be no assurance that we will generate
sufficient  revenues in the future  (through  sales or otherwise) to improve our
liquidity or sustain future operations, that our production capabilities will be
adequate,  that other products will not be produced by other companies that will
render  our  products  obsolete,  or that  other  sources  of  funding  would be
available, if needed, on favorable terms or at all.

     We are seeking to improve our liquidity  through increased sales or license
of products and technology. In an effort to generate sales, we have marketed our
encryption products directly to U.S. and international distributors, dealers and
original  equipment  manufacturers  that market our  encryption  products and to
end-users. We have been working with several large organizations to provide them
with both our hardware and software  encryption  solutions  for them to evaluate
whether the solutions meet their security  requirements and have begun supplying
several major U.S. companies with our encryption products. We have also begun to
market our flat  panel  video  display  products  to  potential  purchasers  for
incorporation  into their products.  During the nine months ended July 31, 2005,
we have  recognized  revenue from sales of  encryption  products and services of
approximately $391,000.


                                       23
<PAGE>

     The following table presents our expected cash requirements for contractual
obligations outstanding as of July 31, 2005:
<TABLE>
<CAPTION>

                                                Payments Due by Period
                                                ----------------------
                            Less
 Contractual                than           1-3            4-5           After
 Obligations               1 year         years          years         5 years         Total
---------------------   ------------   ------------   ------------   ------------   ------------
<S>                      <C>                <C>            <C>             <C>       <C>
Consulting
Agreement                $ 105,000           -              -               -        $ 105,000


Noncancelable
Operating Leases         $ 217,000           -              -               -        $ 217,000
                        ------------   ------------   ------------   ------------   ------------

Total Contractual
Cash Obligations         $ 322,000           -              -               -        $ 322,000
                        ============   ============   ============   ============   ============
</TABLE>


IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
------------------------------------------

     In  December  2004,  the FASB  issued  SFAS  No.  123(R),  "Accounting  for
Stock-Based  Compensation"  ("SFAS No.  123(R)").  SFAS No.  123(R)  establishes
standards for the accounting for  transactions in which an entity  exchanges its
equity  instruments for goods or services.  This Statement  focuses primarily on
accounting  for  transactions  in which an entity obtains  employee  services in
share-based payment  transactions.  SFAS No. 123(R) requires that the fair value
of such  equity  instruments  be  recognized  as an  expense  in the  historical
financial  statements as services are performed.  Prior to SFAS No. 123(R), only
certain pro forma  disclosures  of fair value were  required.  The provisions of
this Statement were effective for the first interim  reporting  period beginning
after June 15, 2005.  In April 2005,  the  Securities  and  Exchange  Commission
announced a deferral of the  effective  date of SFAS No.  123(R) until the first
interim reporting period of the first fiscal year beginning after June 15. 2005.
Accordingly,  we will adopt SFAS No. 123(R)  commencing  with the quarter ending
January 31, 2006. We are currently evaluating the effect of SFAS No. 123(R). The
adoption  of SFAS No.  123(R)  is  expected  to have a  material  effect  on our
financial statements.

     In May 2005,  the FASB issued SFAS No. 154,  "Accounting  Changes and Error
Corrections"  ("SFAS  154").  SFAS 154 replaces the Accounting Principles  Board
Opinion  No. 20,  "Accounting  Changes"  and SFAS No. 3,  "Reporting  Accounting
Changes in Interim Financial  Statements," to require retrospective  application
to prior periods' financial statements of changes in accounting  principle.  The
provisions of SFAS 154 are effective for accounting changes made in fiscal years
beginning  after  December 15, 2005. The adoption of SFAS 154 is not expected to
have a material effect on our financial statements.


                                       24
<PAGE>

     In December 2004,  the FASB issued SFAS No. 153,  "Exchanges of Nonmonetary
Assets" ("SFAS 153").  SFAS 153 amends  Accounting  Principles Board Opinion No.
29,  "Accounting for Nonmonetary  Transactions," to eliminate the exception from
fair value  measurement for nonmonetary  exchanges of similar  productive assets
and replaces it with a general  exception  for exchanges of  nonmonetary  assets
that do not have commercial substance.  The provisions of SFAS 153 are effective
for nonmonetary  exchanges  occurring in fiscal periods beginning after June 15,
2005. The adoption of SFAS 153 is not expected to have a material  effect on our
financial statements.


FORWARD-LOOKING STATEMENTS
--------------------------

     Information  included  in this  Quarterly  Report on Form 10-Q may  contain
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation Reform Act of 1995.  Forward-looking statements are not statements of
historical facts, but rather reflect our current expectations  concerning future
events and results. We generally use the words "believes," "expects," "intends,"
"plans,"  "anticipates,"  "likely,"  "will" and similar  expressions to identify
forward-looking  statements.  Such forward-looking  statements,  including those
concerning our  expectations,  involve risks,  uncertainties  and other factors,
some of which are  beyond  our  control,  which may  cause our  actual  results,
performance or achievements,  or industry  results,  to be materially  different
from any future results,  performance,  or achievements  expressed or implied by
such forward-looking statements. These risks, uncertainties and factors include,
but  are not  limited  to,  those  factors  set  forth  in  "General  Risks  and
Uncertainties"  below and Note 1 to Condensed Financial  Statements.  You should
read this  discussion and analysis along with our Annual Report on Form 10-K for
the year ended October 31, 2004 and the condensed financial  statements included
in this  Report.  We undertake no  obligation  to publicly  update or revise any
forward-looking  statements,  whether  as a result  of new  information,  future
events  or   otherwise.   You  are   cautioned   not  to  unduly  rely  on  such
forward-looking  statements when  evaluating the  information  presented in this
Report.


GENERAL RISKS AND UNCERTAINTIES
-------------------------------

     Our business involves a high degree of risk and uncertainty, including, but
not limited to, the following risks and uncertainties:

o    We have  experienced  significant  net losses and negative  cash flows from
     operations and they may continue.

     We have had net losses and negative cash flows from operations in each year
since our  inception  and in the nine  months  ended July 31,  2005,  and we may
continue to incur substantial  losses and experience  substantial  negative cash
flows from  operations.  We have  incurred  substantial  costs and  expenses  in
developing our encryption and flat panel display technologies and in our efforts


                                       25
<PAGE>

to produce  commercially  marketable products  incorporating our technology.  We
have had limited  sales of products to support  our  operations  from  inception
through  July 31,  2005.  We have set forth below our net losses,  research  and
development  expenses and net cash used in operations for the nine-month periods
ended July 31, 2005 and 2004,  and for the fiscal  years ended  October 31, 2004
and 2003:
<TABLE>
<CAPTION>

                                                      (Unaudited)
                                                    Nine Months Ended                 Fiscal Years Ended
                                                        July 31,                          October 31,
                                             ------------------------------     ------------------------------
                                                  2005             2004              2004             2003
                                                  ----             ----              ----             ----
<S>                                           <C>              <C>               <C>              <C>
Net loss                                      $ 3,305,542      $ 2,538,466       $ 3,360,655      $ 3,114,411
Research and development expenses             $ 1,725,197      $ 1,732,345       $ 2,164,427      $ 1,807,742
Net cash used in operations                   $ 1,295,510      $   811,240       $ 1,205,122      $   958,501
</TABLE>

o    We may need additional  funding in the future which may not be available on
     acceptable  terms  and,  if  available,  may  result  in  dilution  to  our
     stockholders, and our auditors have issued a "going concern" audit opinion.

     We anticipate  that, if cash generated from  operations is  insufficient to
satisfy our  requirements,  we will require  additional  funding to continue our
research and  development  activities  and market our  products.  The  auditor's
report on our  financial  statements  as of October 31, 2004 states that the net
loss incurred during the year ended October 31, 2004, our accumulated deficit as
of that  date,  and  the  other  factors  described  in Note 1 to the  Financial
Statements included in our Annual Report on Form 10-K for the year ended October
31,  2004,  raise  substantial  doubt  about our  ability to continue as a going
concern.  The auditor's  report on our financial  statements  for the year ended
October 31, 2003 contained a similar  statement.  Our financial  statements have
been  prepared  assuming we will  continue as a going concern and do not include
any adjustments that might result from the outcome of this uncertainty.

     We believe that our existing  cash and accounts  receivable,  together with
cash flows from expected sales of encryption  products and flat panel  displays,
and other  potential  sources of cash flows,  will be sufficient to enable us to
continue  in  operation  until at least the end of the third  quarter  of fiscal
2006.  We  anticipate  that,  thereafter,  we will require  additional  funds to
continue marketing,  production, and research and development activities, and we
will require  outside  funding if cash generated from operations is insufficient
to satisfy our liquidity  requirements.  However, our projections of future cash
needs and cash flows may differ from actual  results.  If current  cash and cash
that may be generated from operations are  insufficient to satisfy our liquidity
requirements,  we may seek to sell debt or equity securities or to obtain a line
of credit  prior to the third  quarter of fiscal  2006.  The sale of  additional
equity   securities  or  convertible  debt  could  result  in  dilution  to  our
stockholders.  We can give  you no  assurance  that we will be able to  generate
adequate funds from operations,  that funds will be available to us from debt or
equity financings or that, if available, we will be able to obtain such funds on
favorable terms and conditions.  We currently have no arrangements  with respect
to additional financing.


                                       26
<PAGE>

o    We may not generate  sufficient  revenues to support our  operations in the
     future or to generate profits.


     We are engaged in two principal operations: (i) the development, production
and  marketing of thin  high-brightness  flat panel video  displays and (ii) the
development,  production and marketing of  multi-functional  encryption products
that provide  information  security for  domestic and  international  users over
virtually every  communications  media. We have only recently started to produce
monochrome  versions  of  our  high-brightness   flat  panel  displays  and  our
encryption  products are only in their initial stages of commercial  production.
Our  investments in research and development  are  considerable.  Our ability to
generate  sufficient  revenues  to support  our  operations  in the future or to
generate profits will depend upon numerous factors, many of which are beyond our
control, including:

          o    our   ability   to   successfully   market   our   line  of  thin
               high-brightness   flat  panel  video   displays  and   encryption
               products;
          o    the   capability   of  Volga  to  produce  thin   high-brightness
               monochrome video displays and supply them to us;
          o    our  ability  to  jointly   develop  with  Volga  and  produce  a
               full-color video display;
          o    our ability to develop and produce  displays  using  controllable
               nanotubes and modified TFT technology;
          o    our  production  capabilities  and  those  of  our  suppliers  as
               required for the production of our encryption products;
          o    long-term performance of our products;
          o    the  capability  of our dealers and  distributors  to  adequately
               service our encryption products;
          o    our ability to maintain an acceptable  pricing level to end-users
               for both our encryption and display products;
          o    the ability of suppliers to meet our requirements and schedule;
          o    our ability to  successfully  develop  other new  products  under
               development;
          o    rapidly changing consumer preferences;
          o    the  possible  development  of  competitive  products  that could
               render our products obsolete or unmarketable;
          o    our future  negotiations  with Volga with respect to payments and
               other  arrangements  under our Joint  Cooperation  Agreement with
               Volga.

     Because our revenue is subject to  fluctuation,  we may be unable to reduce
operating expenses quickly enough to offset any unexpected revenue shortfall. If
we have a shortfall in revenue in relation to expenses,  our  operating  results
would  suffer.  Our  operating  results  for any  particular  quarter may not be
indicative   of   future   operating   results.   You   should   not   rely   on
quarter-to-quarter  comparisons of results of operations as an indication of our
future performance.


                                       27
<PAGE>

o    We are dependent  upon a few key  executives and the loss of their services
     could adversely affect us.

     Our future success is dependent on our ability to hire, retain and motivate
highly qualified personnel. In particular,  our success depends on the continued
efforts of our Chief  Executive  Officer,  Denis A. Krusos,  and our  President,
Frank J.  DiSanto,  who  founded  our  company  in 1982 and are  engaged  in the
management  and  operations  of  our  business,  including  all  aspects  of the
development,  production and marketing of our encryption products and flat panel
display  technology.  In addition,  Messrs.  Krusos and DiSanto,  as well as our
other skilled  management and technical  personnel,  are important to our future
business  and  financial  arrangements.  The  loss of the  services  of any such
persons  could have a material  adverse  effect on our  business  and  operating
results.

o    The small size of our  accounting  and financial  staff has exposed us, and
     may expose us in the future, to risks relating to our internal control, and
     may limit our growth.

     The small size of our  accounting  and  financial  staff has  exposed us to
risks relating to our internal control over financial reporting.  In particular,
as  discussed in our Annual  Report on Form 10-K for the year ended  October 31,
2004 under Item 9A,  Controls and  Procedures,  in December  2004, we discovered
that an employee  in our  accounting  staff had  defrauded  us of  approximately
$189,000 (of which  approximately  $4,000 we believe was replaced) during fiscal
2004 and the first month of fiscal  2005 and  approximately  $28,000  during the
period  from  fiscal  2001  through   fiscal  2003.   While  we  have  recovered
approximately  $110,000 of such loss  through  insurance  proceeds  and may seek
additional recoveries from other parties, and we have taken steps to improve our
internal  controls  to prevent  such  activity  in the  future,  there can be no
assurance that our controls and procedures  will prevent all errors or fraud, or
that any future such losses  would be insured or otherwise  recoverable.  We may
need to recruit  additional staff to improve our internal controls or to support
growth of our business,  the costs of which would reduce the funds available for
research and development and marketing activities.

o    The very  competitive  markets for our  encryption  products and flat panel
     display  technology  could  have  a  harmful  effect  on our  business  and
     operating results.

     The markets for our encryption  products and flat panel display  technology
worldwide are highly  competitive  and subject to rapid  technological  changes.
Most of our  competitors  are larger  than us and possess  financial,  research,
service  support,  marketing,  manufacturing  and other resources  significantly
greater  than  ours.  Competitive  pressures  may have a  harmful  effect on our
business and operating results.

o    Our common  stock is subject to the SEC's  penny stock rules which may make
     our shares more difficult to sell.

     Our stock fits the  definition  of a penny stock.  The SEC rules  regarding
penny  stocks may have the effect of  reducing  trading  activity  in our common
stock and making it more  difficult for  investors to sell.  The rules require a
broker to deliver a risk  disclosure  document that provides  information  about
penny  stocks and the nature and level of risks in the penny stock  market.  The


                                       28
<PAGE>

broker  must also give bid and  offer  quotations  and  broker  and  salesperson
compensation information to the customer orally or in writing prior to effecting
a transaction and in writing with the confirmation. The SEC rules also require a
broker  to make a  special  written  determination  that  the  penny  stock is a
suitable  investment  for the  purchaser  and  receive the  purchaser's  written
agreement  to  the  transaction  before  completion  of the  transaction.  These
requirements  may result in a lower trading volume of our common stock and lower
trading prices.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk.
         -----------------------------------------------------------

     We have  invested a portion of our cash on hand in short  term,  fixed rate
and highly liquid  instruments that have  historically been reinvested when they
mature throughout the year. Although our existing instruments are not considered
at risk  with  respect  to  changes  in  interest  rates or  markets  for  these
instruments,  our rate of return on these  securities  could be  affected at the
time of reinvestment, if any.


Item 4.  Controls and Procedures.
         ------------------------

     We  carried  out  an  evaluation,   under  the  supervision  and  with  the
participation  of our  management  including our Chairman of the Board and Chief
Executive Officer and our Vice President - Finance and Chief Financial  Officer,
of the effectiveness of the design and operation of our disclosure  controls and
procedures  pursuant to Rule 13-15(b) of the Securities Exchange Act of 1934, as
amended.  Based  upon  that  evaluation,  our  Chairman  of the  Board and Chief
Executive  Officer and our Vice President - Finance and Chief Financial  Officer
concluded  that our  disclosure  controls and procedures are effective as of the
end of the period covered by this report.

     There was no change in our internal control over financial reporting during
the quarter ended July 31, 2005 that has materially  affected,  or is reasonably
likely to materially affect, our internal control over financial reporting.




                                       29
<PAGE>


                           PART II. OTHER INFORMATION
                           --------------------------


Item 6.  Exhibits.
         ---------

             31.1   Certification  of  Chief  Executive  Officer,   pursuant  to
                    Section  302  of  the  Sarbanes-Oxley  Act  of  2002,  dated
                    September 9, 2005.

             31.2   Certification  of  Chief  Financial  Officer,   pursuant  to
                    Section  302  of  the  Sarbanes-Oxley  Act  of  2002,  dated
                    September 9, 2005.

             32.1   Statement of Chief  Executive  Officer,  pursuant to Section
                    1350 of Title 18 of the United States Code,  dated September
                    9, 2005.

             32.2   Statement of Chief  Financial  Officer,  pursuant to Section
                    1350 of Title 18 of the United States Code,  dated September
                    9, 2005.


                                   SIGNATURES
                                   ----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                         COPYTELE, INC.


                                         By: /s/ Denis A. Krusos
                                             ------------------------------
                                         Denis A. Krusos
                                         Chairman of the Board and
                                         Chief Executive Officer
September 9, 2005                        (Principal Executive Officer)



                                         By: /s/ Henry P. Herms
                                             ------------------------------
                                         Henry P. Herms
                                         Vice President - Finance and
                                         Chief Financial Officer (Principal
September 9, 2005                        Financial and Accounting Officer)




                                       30